UK prices jumped by 10% in the year to November, the Office for National Statistics (ONS) said, despite people facing cost of living pressures.

Demand was particularly high outside of London. South West England saw prices rise by 12.9%.

In December, a housing taskforce was agreed in Devon amid residents’ unease.

There was “little housing available for Devon people”, Councillor John Hart, Conservative leader of Devon County Council, said at the time.

• Council leader declares ‘housing crisis’ in Devon
• Young and low paid ‘priced out’ of tourist areas

The average UK house price in November was £271,000. That’s £25,000 higher than a year earlier, the ONS said.

In Scotland, the average house price hit a record level of £183,000 in November, where property values increased by 11.4% over the year.

In England, average house prices increased by 9.8% over the year to hit £288,000. In Wales, they climbed by 12.1% to £200,000 and in Northern Ireland they were up 10.7% to £159,000.

The slowest regional growth was a 5.1% annual increase in London.

Detached homes were becoming comparatively more expensive than other types of property, according to data from the Land Registry. In England, the average price of a detached homes was up 13.8% in a year, and in Wales it recorded an average 15.3% increase. In comparison, prices of flats had grown more slowly – up 5.1% in England and 6.9% in Wales.

Emma Cox, sales director at Shawbrook Bank, said: “The harsh reality is that this extended period of ground-breaking house prices will provide challenges for the market as we move further into 2022.

“With inflation reaching 5% this year and the cost of living rising, it’s imperative that buyers don’t overstretch themselves in pursuit of their dream home.”

Commenting, Robert Gardner, chief economist for Nationwide, said: “Annual house price growth accelerated to 13.4 per cent in June, the highest outturn since November 2004. While the strength is partly due to base effects, with June last year unusually weak due to the first lockdown, the market continues to show significant momentum. Indeed, June saw the third consecutive month-on-month rise (0.7 per cent), after taking account of seasonal effects. Prices in June were almost 5 per cent higher than in March.”

There was much comment on the increase from within the industry. Sundeep Patel, director of sales at Together, said: “Another month of strong growth for house prices goes to show just how competitive the race for space has become, with buyers still eager to snap up properties at pandemic prices, ahead of the first taper for the Stamp Duty holiday extension ending this week. Today’s figures show house prices were up by 0.7 per cent month-on-month and annual house prices rose by a staggering 13.4 per cent – the highest level recorded since November 2004.”

He added: “That said, from the second half of the year onwards, we are expecting to see things start to slow down as potential buyers adapt to this next phase of the pandemic, without Government support and tax breaks. Whatever property financing is needed in the future, lenders who can offer a degree of flexibility are going to be highly sought after, as people look to pursue property plans against their changing needs in the market.”

Others were far more critical.

Guy Harrington, CEO of residential lender Glenhawk: “This is only going to end one way. Given the economic backdrop and with government support schemes ending in a few months, this insane level of growth is long overdue a correction. In some rural hotspots houses are selling for 40 per cent over the asking price. The UK housing market has a rocket attached that is burning low on fuel and once this perfect storm passes, we are headed for a serious shock to the system.”

2020 was a record year for property prices, with the average price increasing by more than £16,000 compared to the previous year. By October, mortgage approvals had hit a 13-year high and November saw 124,800 transactions completed, 18,000 more than the five-year average.

Haysto analysed the latest government data to see which towns saw the highest and lowest rate of property purchases in 2020 and which areas saw the biggest increase or decrease compared to 2019.

Huntingdon in Cambridgeshire saw the biggest number of property purchases in 2020 with over 400 per capita. Properties in Huntingdon were, on average, almost £10,000 cheaper compared to the regional average in Cambridgeshire throughout 2020.

Pontefract followed in second place, with over 328 property sales per capita. This surge in property prices could be due to the lower house prices compared to that in 2019. It was revealed overall, sold prices in Pontefract over the last year were down 3%.

Great Yarmouth (320.1), Preston (319.7) and Chichester (319.7) complete the top five towns with the highest number of property purchases per capita in 2020.

At the other end of the scale, Portsmouth had the fewest property sales, with only 50.9 per capita. Despite having a population of nearly a quarter of a million, there were only 1,267 properties sold over the course of the year.

Haysto point also to a recent study that found that the city is England’s second worst town for council home quality, with 38% failing to meet the Decent Homes Standard by the end of March 2020.

Wirral (55.7), Luton (72), Watford (73.7) and Birmingham (75) complete the bottom three towns with the lowest number of property sales per capita in 2020.

Salford saw the biggest change, with a 68.5% decline, the largest year-on-year drop across the rest of the nation. The area saw sales fall from 3,325 in 2019 to only 1,049 in 2020. Basingstoke follows with a 51% drop in sales in 2020 with only 1,273 sales completed last year.

Cardiff is the only Welsh town featured in the top five towns property sales most affected by COVID-19, with a 51.1% drop in sales compared to those in 2019 according to the research.

Although Guildford (29%), Maidstone (29.3%) and Gateshead (30.5%) were deemed least affected from their property sales, they still saw a decline of 30% compared to their 2019 sales, demonstrating the effect COVID-19 has had across the nation.

Paul Coss, co-founder and specialist mortgage broker at Haysto, said: “The impact of COVID-19 changed the property market in 2020 nationwide. I believe when we come out of lockdown and the economy starts to bounce back, this could be a good year to move or get on the property ladder.

“Next month lenders are due to launch new mortgage deals with more flexible lending criteria to encourage more people to move home. It’s much-needed to support those who’ve been impacted by COVID-19 such as furloughed staff, self-employed, or people who’ve seen their credit affected by financial struggles.”

The latest UK House Price Index published in January this year states that house prices had increased by 7.6% in the year to November 2020, up from 5.9% in October. On a non-seasonally adjusted basis, average house prices in the UK increased by 1.2% between October and November, which is significant considering house prices fell by 0.4% during the same period a year earlier. 

Based on this, it seems that the mini-boom experienced in the property market, due to the pandemic and subsequent lockdowns, was still alive and well as we neared the end of 2020. While many were predicting house prices to fall last year it never materialised, instead surges in demand from people reassessing the way they want to live, only pushed them skyward. The record high property prices experienced throughout last year was a reflection on how robust the property market is, as well as peoples fortitude to move despite challenging circumstances. 

Another indication that the boom might not yet be over is the reintroduction of low-deposit mortgages. In early September 2020, low-deposit mortgages were scarce with only 44 available products, this has increased to nearly 200 products according to data from Moneyfacts. This is a significant adjustment and likely to stimulate the first-time-buyer market, once again allowing first-time buyers to realise their homeownership dreams.

A post-Brexit trade deal was finally agreed on December 24, unleashing a spirit of hope as the year drew to an end. The property market is booming with the economic certainty of Brexit providing a reason for confidence in the market. However, some experts believe this boost cannot last in the longer term. With the rapid rise of unemployment as a direct result of the coronavirus pandemic, many property experts claim the property market will likely be affected by the positive effects of Brexit for a short-term period before the overwhelming impact of the coronavirus crisis begins to have a greater effect on the industry.

Property company Keller Williams found UK house prices climbed 14.1 percent since the referendum vote in June 2016. This rate of growth was driven by changes in Wales and the Midlands. The East Midlands saw the most significant increase with house prices rising by 20.9 percent, while values rose by 19 percent in the West Midlands. Wales saw a similarly impressive rise in house prices at 20.3 percent since June 2016 according to the property platform. London, the North East and the South East were the only regions which failed to achieve double-digit growth attaining rises of 3.2, 6.7 and 9.2 percent respectively.

The rate of growth however has slowed since the EU Referendum vote on June 23, 2016. Research proves house prices increased by 14.1 percent since June 2016, whereas they had increased by 28.3 percent during the same period before the vote.

Keller Williams UK CEO Ben Taylor said: “Regardless of whether you voted Leave or Remain and purely from a property perspective, you could argue that Brexit has provided the perfect tonic for the UK property market.

“Yes, a handful of areas have seen prices fall since the vote itself. However, the vast majority of the UK has seen the value of bricks and mortar continue to climb despite the rollercoaster ride that Brexit has been.

“At the same time, the rate of house price growth seen since the vote has slowed in 69 percent of areas.

“This won’t have addressed the outright issue of affordability that many faces when trying to get a foot on the ladder.

“However it does, at least, mean that homebuyers are paying less than they may have otherwise while homeowners have still seen an increase in the value of their investment.”

The four per cent rise in November was the biggest monthly increase since April 2000 and it pushed the annual rate of increase to 9.7 per cent, the fastest since July 2016.

Agents say the surprise lockdown property boom has been fuelled by the release of a massive backlog of demand since the Brexit referendum; an urge to escape from small flats with no outdoor space during the pandemic, and turbo-charged by the rush to beat the March 31 deadline for the stamp duty holiday.READ MORE’Accidental’ lockdown savers push up house prices in home buying surge

George Franks, co-founder of London-based estate agents, Radstock Property, said “Considering England was in national lockdown for most of November, and a growing number of people are looking to move away from big cities in favour of more space, the resilience of the capital’s property market is staggering.

“Despite the extraordinary challenges of the pandemic and the shift to remote working, London is neither down nor out.

“Pressure is growing on the Treasury to extend the stamp duty deadline given the new national lockdown and we would not be surprised to see a statement this month.”

There had been fears that the market could be heading for a slump after the stasmp duty holiday ends but some experts now think that the strong momentum will carry it through for the rest of the year.READ MOREI’m in a support bubble with the capital’s estate agents

Iain McKenzie, chief executive of The Guild of Property Professionals, said:”Our members all reported unprecedented levels of activity during the closing stages of 2020. The usual seasonal slowdown simply did not materialise.

“Looking into 2021 as a whole, the mass vaccination roll-out should bolster sentiment in spite of all the economic uncertainty and may prevent the fall in values many were expecting.”

The biggest rise in London was in Kensington & Chelsea, where they went up by 28.6 per cent year on year to an average of more than £1.5 million, although this is likely have been distorted by a small number of highly priced sales.

Next came Brent, where prices rose 23.9 per cent, followed by the City of London (18.6 per cent) and Merton (14.9 per cent)

High demand for so-called prime property has led the UK housing market’s post-lockdown rebound, new data from estate agents Knight Frank revealed today.

Since markets reopened in mid-May, the UK market has surged back at a surprisingly swift pace due to the release of a tide of pent-up demand.

According to the research, the biggest increase in deals agreed since lockdown ended has taken place in the prime market, which comprises the most expensive property.

A quicker recovery here tallies with a similar trend which took place during the period that followed the global financial crisis, Knight Frank said.

As of the week ending 16 August, the number of sales subject to contract for properties valued over £1m was up 100 per cent year on year, according to Rightmove.

The figure was even higher for property priced between £750,000 and £1m, which jumped by 118 per cent.

By contrast, the number of offers accepted for properties valued up to £500,000 was only 53 per cent higher.

Overall, analysis of total sales subject to contract on Rightmove showed a jump of 61 per cent jump with the same week last year. 

According to Knight Frank’s own data, the number of sales in the capital was up 68 per cent year-on-year, while for the country as a whole it was up a whopping 158 per cent. 

Oliver Knight, head of residential development research at Knight Frank said: “Such a strong rebound reflects the ongoing release of pent-up demand following lockdown, coupled with the recent cut to stamp duty.”

He added: “It is also likely that there are wider behavioural shifts in play, as people reassess their housing needs – the ‘escape to the country’ narrative is one that has been covered in detail.”

In July, chancellor Rishi Sunak announced a stamp duty “holiday” as part of his summer statement, instantly raising the threshold at which people pay the stamp duty property tax to £500,000 from £125,000.

As a result of the tax cut, which will run until the end of March next year, UK house prices jumped back last month, after tumbling in June.

THE UK housing market continues to defy gravity as yet more positive data was released this morning, charting the rise in property sales in July.

According to HMRC, last month 80,490 residential property transactions completed in the UK on an unadjusted basis, an increase on the 67,060 completions in June, but still 23 percent below the 104,780 homes sold in July 2019. On the face of it then, encouraging but not too remarkable. Except that, if you dig a little deeper, something quite significant occurred in July with the numbers which could at first be missed by the headline figures.

When we look at the unadjusted completion numbers for England in isolation, we find that there were 71,190 residential properties sold in July. That’s slightly higher than in January, when 71,030 transactions completed in England.

Although that feels like a different time in history, cast your mind back and you’ll recall the beginning of this year saw the UK property market in the grip of a ‘Boris Bounce’ following his convincing victory in the general election in December.

The fact transaction levels in England are now back up at the same level as they were previously, given that the UK property sector returned to work in the middle of May is nothing short of astounding.

Particularly when we factor in that the stamp duty holiday was only announced on 8th July, meaning that its positive impact and concomitant rise in buyer activity won’t be evident in the HMRC data until September at the earliest.

James Anderson, Operations Director of property lender MT Finance commented: “These figures reflect how extremely active the property market was in July and are hugely encouraging, particularly as the stamp duty holiday has not yet been reflected in the official numbers.

“During lockdown we saw transactions fall to below the level of the financial crisis of 2008, which was no surprise as it was impossible for life to continue as ’normal’ but we are now seeing pent-up demand from that period confirmed in the sales volumes.” 

Agreeing with the positive outlook today’s data conveys is former RICS residential chairman Jeremy Leaf, who added: “Transactions are a better measure of market strength than more volatile property prices.

“Although these numbers are a little dated because there is an inevitable time lag between when a sale is agreed and completion, they show buyers were emerging from lockdown and taking advantage of continuing low interest rates even before the stamp duty holiday was announced.”

Jeremy continued: “Looking forward, future results are only likely to be stronger as they will take account of the even more significant upsurge in activity we have seen on the ground since July.”

One unintended consequence of the current property ‘gold rush’ is that solicitors and mortgage brokers, both a fundamental to the sector, are still currently struggling with the backlog of deals that were put on hold during lockdown which has meant deals are taking far longer to complete than usual.

As Peter Ambrose, managing director of London property law firm The Partnership explained: “We’ve seen the London and South East market continue to contradict all those that had predicted doom and gloom earlier this year. 

“Across our patch, we’ve seen instructions increase week on week and there are still no signs of it slowing.  The only small cloud on the horizon is we’re not getting as many deals through as quickly as we’d like.”

Peter continued: “We are now running at nearly double the number of transactions we were processing just three months ago, yet many of the exchanges are simply not going through. 

“This is partly due to the sheer volume of backlogged cases that were on hold due to lockdown in addition to all the new deals that have been agreed since mid-May when estate agents reopened, but also due to many lawyers still not being in the office along with pressure on surveyors and mortgage lenders and their caseloads too.” 

Islay Robinson, CEO of high net worth mortgage brokers Enness Global confirmed: “This very sudden opening of the taps means that property lawyers, some mortgage lenders and the capacity for their related valuation surveys are already creaking at the seams in coping with the up-turn.”

Islay cautioned: “If buyers and sellers expect to be moved by the end of the stamp duty holiday let alone Christmas, they must act now and with haste or else it is likely that one if not both of these important thresholds will be missed.”

With just 18 weeks until Christmas, which is now anecdotally the average time from offer to completion in many parts of the UK, buyers who are looking forward to putting up the decorations and enjoying festive celebrations in their new abode may need to get a move on.

No pun intended.

The U.K. government has introduced a tax holiday for buyers as one of its measures to stimulate the property market. Alpa Bhakta of Butterfield Mortgages Limited takes us through the detail and looks at the potential tax issues for foreign investors in the U.K. property market.

While we seem to have passed the peak of Covid-19 cases in the U.K., there are still immense challenges facing the country as it begins its post-pandemic recovery. Market volatility is rife; and there are still unanswered questions regarding the U.K. economy’s ability to recuperate and recover the losses incurred.

For the moment, the U.K. government has been actively encouraging a return to relative normality through targeted reforms and policies that support businesses, investors and consumers. These measures are by no means permanent, but rather, their aim is to reinstate confidence and put the wheels of the economy back into motion.

One of the more pronounced steps taken has been the introduction of a Stamp Duty Land Tax (SDLT) holiday; something I have commented extensively on throughout the year.

The SDLT holiday has been in place in England and Northern Ireland since the Chancellor Rishi Sunak announced his mini-budget on July 8, 2020. By increasing the minimal threshold of SDLT to 500,000 pounds ($654,500) for property sales until March 31, 2021, buyers could be exempt from paying as much as 15,000 pounds on their next purchase.

The aim of the tax relief is simple—to encourage buyers to return to the property market. In turn, this will boost the number of transactions taking place and contribute to the positive growth of house prices. So far, it has been having the desired effect. Nationwide’s House Price Index for July noted that annual house prices had grown by 1.5%. What’s more, prices were up 1.7% month-on-month.

This is welcome news for the Chancellor, but my advice is to not to become complacent. Ensuring that house prices will continue to steadily increase over the next few months is key.

Foreign Capital is Vital to the U.K.’s Property Recovery

The SDLT holiday applies to all transactions, including purchases being made by non-U.K. residents. The government clearly wants to encourage capital injections from domestic and international sources, and so far, this holiday has been well received.

U.K. real estate is an attractive asset for international buyers, particularly when we look at the top end of the market. For example, in 2019 alone, non-U.K. residents were responsible for over half (55%) of all prime central London (PCL) property transactions. Its historical resilience and rate of capital growth over long-term periods ensures consistent market demand for bricks and mortar in London.

Covid-19 has not dampened this demand, particularly when it comes to buyers based in Hong Kong, mainland China, and Singapore. According to Beauchamp Estates, the amount of Hong Kong and mainland Chinese investment it handled into PCL property between December 2019 and June 2020 totaled $374 million. It also found that this group of buyers accounted for 20% of deals above 10 million pounds in the capital.

On top of this, the political situation in Hong Kong is compelling investors in the jurisdiction to consider stable markets with assets that can deliver modest capital growth in the medium- to long-term. The PCL property market is a popular destination, and based on the conversations we’ve been having, there is good reason to expect an influx of investment from these investors over the coming months.

In light of this, it is important for non-U.K. residents to be fully aware of the different tax issues they could face when investing in property.

What Tax Issues do Non-U.K. Residents Need to be Aware of?

The tax framework governing the U.K. property market has undergone significant changes in recent years. While still encouraging foreign investment into residential and commercial real estate, the changes have meant that nonresident owners of property are now subject to more rules and regulations. This is particularly true when it comes to managing a property that is generating income, such as a buy-to-let investment.

To better understand the taxation regime, it is helpful to understand the taxes that apply when buying and selling property in the U.K.

When Buying a Property…

SDLT is applicable to all property transactions involving non-U.K. residents. While it is initially calculated in bands based on the value of the property, international buyers are also subject to a surcharge. This surcharge applies to all transactions whereby the buyer is purchasing a property in addition to their primary residence, be it a buy-to-let investment or a secondary residence. Again, this surcharge is calculated based on the value of the property.

In light of the current circumstances, non-U.K. residents are exempt from paying SDLT on the first 500,000 pounds on all property sales. However, the surcharge still applies during this holiday period. What’s more, the government will be introducing a further SDLT surcharge of 2% that will be applicable to all non-U.K. buyers in April 2021. This was initially announced in the 2020 Spring Budget and it is not yet known whether this surcharge will come into force next year as planned, or be delayed as a means of encouraging further foreign investment into British real estate.

When Selling a Property…

Capital gains tax (CGT) is paid by the seller once the transaction has been completed. In 2015, it became mandatory for all non-U.K. residents to pay CGT. Prior to this, international sellers were exempt from paying the tax if they had been classed as a non-U.K. resident for five consecutive years. The tax is calculated by subtracting the sale value from the original purchase value. At the moment, CGT is charged at the rate of 28% when the total taxable gains and income are above the income tax basic rate band. If this is not the case, the rate drops to 18%.

CGT is important to understand for those international buyers who are leveraging U.K. property for short- and medium-term gains. What’s more, significant changes to CGT could be on the horizon. Chancellor Rishi Sunak has ordered a review of the tax which could result in the introduction of sweeping reforms in the 2020 Autumn Budget. Based on the economic impact of Covid-19, such a review could lead to an increase in the CGT rate.

Aside from the taxes linked to the buying and selling of real estate, international investors also need to be aware of the tax that they are liable to pay when owning a property. The nonresident landlord scheme applies to those landlords who live abroad for more than six months a year: even if they are a primary resident in another tax jurisdiction, they are still required to pay tax to the U.K. government in the first instance. A tax credit can then be used in their home country to ensure they are not double-taxed. Of course, this process is managed on a case-by-case basis depending on the legislation that is currently in place between the U.K. and the nonresident landlord’s home country.

Taking Advantage of Property Investment

The SDLT holiday will no doubt encourage an influx of capital from volatile markets into U.K. real estate. For those planning to diversify their portfolios and take advantage of the bricks-and-mortar discounts in the coming months, it is necessary to understand the different taxes that currently apply to international investors.

The tax framework governing property purchases in the U.K. can be complex and overwhelming at times. At the same time, it could be subject to wide-sweeping changes as the government considers ways of stimulating investment and raising revenue in response to Covid-19. Such potential adjustments are understandable given the economic severity of the coronavirus pandemic. In any event, it will be advisable to consult with a wealth adviser or financial professional when considering investing in U.K. property.

Alpa Bhakta is the CEO of Butterfield Mortgages Limited, part of the Butterfield Group and a subsidiary of The Bank of N.T. Butterfield & Son Limited.

The author can be contacted at: alpa.bhakta@butterfieldgroup.com

The opinions expressed in this article are those of the author and do not necessarily reflect those of Butterfield Mortgages Limited or the wider Butterfield Group.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.